"We still think tech shares have a chance to lead a market rebound in the next couple of months [on strong profit growth]," Morgan Stanley strategist Dickson Ho (何資文) said in a report, titled the "Technology sector: Cautious but not pessimistic."

"Tech end-demand is still looking fine," Ho said in the report, citing fewer US firms giving negative prospects amid recent high oil prices of around US$70.

Chipmaker ATI Technologies Inc is the only technology firm to have issued a performance warning, blaming shrinking market share rather than slow demand, he wrote.

Another 23 percent expansion should be seen in the final quarter of this year, according to Ho.

"We believe better performance numbers released over the next few months could drive a share-price rebound for the sector," Ho wrote.

Ho said he maintains his "overweight" rating on six Taiwanese technology firms, including MediaTek Inc (聯發科技), the world's biggest maker of chips for DVDs, and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's top contract chipmaker.

Advanced Semiconductor Engineering Inc (日月光), a provider of chip-testing services, which is also on the recommendation list, yesterday said sales last month set a high for this year, reaching NT$7.61 billion, up 12 percent from July.